Long Term Care Insurance: How to Choose the Best Elimination Period

In a long-term care insurance (LTCI) policy, the elimination period is often referred to as the policy deductible. In many ways it is similar to the deductible used in major medical insurance policies. One significant difference is this: rather than a certain dollar amount that you will initially pay for your own care expenses, there is a specified number of days for which you will be responsible for your own care.

What are My Options?

These days very few carriers offer a zero-day elimination period. The most common choices are 30, 60, 90, 180 and 365 days, although these periods can vary from one carrier to another. The choice of 180 or 365 days is most often made by those who have significant assets of their own. Selecting a longer period helps them keep the cost of LTCI extremely low. Even if one chooses a 90-day elimination period, the amount of funds put at risk is miniscule when compared to the asset protection afforded by the policy’s total pool of benefits.

What is a Reasonable Choice for an Elimination Period?

Some popular financial authors recommend setting it as low as possible, perhaps even at zero. It’s true that the shorter the elimination period, the less likely it is that you will have to pay out when the time comes for you to begin receiving care. On the other hand, low elimination periods can have a dramatic effect on the premiums that you pay throughout the life of the policy. Usually some form of compromise is necessary for the sake of affordability. In making a decision about the elimination period, many policyholders keep in mind that insurance is often used as a way to avoid suffering catastrophic financial losses rather than insuring against every possible expense. Accepting a small portion of the risk involved can be an economical and reasonable choice for most people.

The Smartest Thing You Can Do

What’s right for most people, however, may not be right for you. In deciding on the best elimination period for your particular situation, it is prudent to consider what the cost would be for the most expensive care that you may have to receive—which is most often facility care. Once you have a good idea of the daily costs for facility care in your area, multiply the costs by the various elimination period choices and determine the amount that you feel is affordable. When you decide on the elimination period that best fits your situation, earmark those funds for your care, and allow them to grow so that they keeps pace with inflation, at the very least. Using a little financial common sense goes a long way toward making a wise decision about the LTCI elimination period.

Until next time...Duane

Duane Lipham is a Certified Long-Term Care (CLTC) consultant.